Economic Systems

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Transcript of Economic Systems

Economic SystemsCapitalism"If there's a dollar to be earned, someone will earn it"An Example of Capitalism:Successful because: Consumerswanted the productHow do we know?Consumers bought iPhonesWhat if the price is too high?Consumers will stop buying itWhat if Apple stops improving the product?What wouldhappen then?Businesses--also known as companies--sell goods or services. Individual citizens own the businesses.Success or failure is decided by the consumer (the individuals who buy the good or service)The cost of the good or service is set by the consumerCompanies must compete withother companies to stay in business"Capital" :Wealth used to create more wealthIf a good or service is not wanted by the consumer, or if the price is too high, the company will go out of business.The Company: AppleThe Product: the iPhoneConsumers will stop buying the productConsumers will buy another phone instead--> Apple goes out of business (competition!)Communism"Communal"-- a society that works together for the common good."We're all in this together."The society sees a need, so the State (the government) creates the product.The State sets the price so that the society has access to the product.Companies only go out of business because the State decides that the product is no longer needed.There is no competition between businesses because only the State is creating products.An Example of CommunismSociety's need? Cars for the common people.AutomobilesThe State creates the Zaporozhets automobile country to produce cars.The price was set by the State so the common people could have the car.The company only went out of business when the Soviet Union (the State) collapsed.Advantage of CapitalismAdvancementIndividuals/Businesses always have to compete with one another, both with products and prices.As a result, capitalist economies create wealth more quickly.In capitalism, advancement is important because it is the consumer who makes the choices.If a consumer wants cars with better gas mileage, what will he or she buy?Toyota CorrollaDisadvantage of CapitalismFailure isan optionWhile those that are successful will produce wealth, those that fail--or those who don't have access to capital--will be left behind.The advantage of CommunismNo one is left behindFailure is NOT an optionThe State provides everyonea joba place to livethe necessitiesThe Disadvantage of CommunismThere is noincentiveto advanceThe State decides:What to produceHow many to produceHow much the product will costWho can buy the productSo--The question is:Why make anything better?The Answer:There is no reason (incentive) to make anything better.The resultMost products of a Communist economy will be inferior to those from a capitalist systemCommunist economies cannot keep up with the technology and advancements of capitalist economiesEXCEPTThere are things that are important to the StateMilitaryAthletic CompetitionSpace ProgramsOther Symbols of National PrideThese things are symbols of the power and strength of the StateBut . . .Keeping up is costlyOne reason the Soviet Union collapsed was that the economy collapsed. The economy collapsed, in part, because the State spent too much money on the military!vs.U.S. FarmingFarming in Chinavs.mid-1960s Soviet phonemid-1960stouchtonetelephone (U.S.)vs.Late 1980s Soviet TVMid 1980s TV-VCR(U.S.)TypewriterTVYes, it's a joke, but there's a truth in there . . .vs.IronAnd, sometimes, the people are so unhappy with the living conditions that they escape to a capitalist economy.Cuban RefugeesChina's Olympic Gymnastics TeamSputnikThe first man-made object in spaceThe KremlinMoscow, Russia"Chairman" Mao Tse-TungThe Communist Leader of China from the 1940s to the 1970sChinese Military ParadeSoviet JetsIN REVIEWCapitalism:"If there's a dollar to be earned, someone will earn it"Advantage: AdvancementDisadvantage: Some people are left behindCommunism:"We're all in this together"Advantage: Everyone gets their basic needs suppliedDisadvantage: The State cannot keep upSovietPosterIN REAL LIFENo nation is totally capitalist or totally communistThe United StatesThe USA has a capitalist economy, BUT . . .The State (government) has programs to help some of its citizens.For example:Social SecurityUnemployment benefitsAid for the needyHelping to pay for collegeUnemployed workers applying for benefits during the Great DepressionDisaster ShelterOn the other hand:China has a communist economy, BUT . . .The State allows some capitalist ideas so that it can keep up.For Example:Some individuals are allowed to profit from their own businesses.Business owners have to compete with other business owners, so they have to improve and advance (which are Capitalist ideas)This also means that new industries create new products (using "capital" to create wealth).China also has allowed "Free Trade Zones"These entire zones function as capitalist regions within China.These Free Trade Zones create much of China's new wealth.Hong KongChinaSome economies try to use the best of both systems.These economic systems are a common mix of capitalism and communismSome businesses that the State thinks are important will be owned by the State.However, any other businesses will be owned by individuals.The advantage:There is advancement, but the State is still able to take care of everyone.The disadvantages:1. It is expensive! Very heavy taxes.2. Advancement is not the highest priority, so the economy will not often be as strong as in a capitalist system.3. Economic growth is limited.Which means that:The State (government) owns everything, including all businesses.Also known as the "Free Market" systemThe CostTo survive, companies must always be producing better products and/or better prices.In other words, companies must advance. If they don't, they won't survive.This graph shows the rapid development of Android phones.This graph shows the rapid development of 3D televisonsThis graph show how much wealth the U.S. (a capitalist economy) has produced.In 1960, the U.S produced about $400 billion of wealthIn 2004, the U.S. was producing about $12 Trillion of wealthThe consumer decides what products will fail and which will succeed.In the 1970s there was a shortage of gasoline.This shortage caused a rise in gas prices, and it also cause long lines at the gas station.Honda CivicA 7 year-old Mr. Jones is in the back seat somewhere.These symbols are all messages to the world about how great the Communist system worksSo the State spares no expense with these symbols of their power.These are all programs paid for by the State (the government) to help those in need.These systems have no particular nameBut they are sometimes referred to by their political system: Socialist Democracy"Socialist" because:Social values are important--taking care of everyone."Democracy" because:The people have the power--advancement is importantOne Last ReviewNo economic system is purely capitalist or purely communist.Some sytems are capitalist, but use some communist ideas.Other nations are communist, but use some capitalist ideasAnd finally,Some economies are an intentional mix of both systemsSome countries in Europe mix the systems.SwedenSpainNorwayTHE ENDandDISADVANTAGESADVANTAGESIn the MiddleDodge ChargerChevy ImpalaMercury Cougar